Creditors reject Mozambique’s proposal to restructure public debt

21 March 2018

The Mozambican government has proposed a 50% pardon of arrears to its creditors and public debt investors, but the creditors have indicated that the proposal will be rejected.

The representative of the group of investors that holds more than 80% of Mozambican public debt said on Tuesday in London that the proposal presented by the Mozambican government will be rejected again at a new meeting that scheduled for Wednesday.

Lawyer Thomas Laryea, a legal advisor to the so-called Global Group of Debt Holders of Mozambique, who claims to represent more than 80% of the total US$727.5 million in debt issued in 2016, told Bloomberg that the proposal is not enough to start meetings.

According to Mozambican newspaper O País, the government proposed to public debt creditors and investors a pardon of 50% of the debt in arrears, that is, US$318 million of the US$636 million in debt that should already have been paid.

According to the document submitted to creditors in London and published in the Mozambican press, Mozambique proposes a 50% pardon in past interest and penalties, “if any,” and changes to the interest rates and maturity of the debt, whose initial term ended in 2020 and has already been extended to 2023.

In its presentation to investors and creditors about the steps the government is taking to restructure public debt, which is unsustainable for Mozambican public finances, the government has made a proposal to creditors to exchange bonds for one of three financial instruments.

In all of them, the maturity is extended by eight, 12 or 16 years, in which the latter will pay a coupon of 2% twice a year until the fifth year and then 3% once a year between the fifth and the tenth year, rising to 6% from then on.

Mozambique plans to reduce debt repayments in the next few years and agrees to pay more at the end of the period, as natural gas revenues are expected to begin to enter Mozambique’s state coffers in the next decade. (macauhub)